US president hosts virtual summit to set global emission targets.
Just call it bankerpalooza, virtual edition.
On Friday, central bankers, finance ministers, government officials, academics and financial market participants are set to discuss the biggest economic issues facing the United States and the world as part of the Federal Reserve Bank of Kansas City’s Economic Policy Symposium in Jackson Hole, Wyoming.
This year’s gathering will be held virtually due to concerns about the fast-spreading Delta variant of the coronavirus.
But protestors eager to use the heavy-hitting economic policy event to shed a light on climate change concerns have already taken action in person.
Earlier this month, professional hikers and climate advocates associated with climate action organisation 350.org climbed to the top of Teewinot Mountain in Wyoming’s Grand Teton National Park and unfurled a banner that read “Stop the Money Pipeline”.
The group is among several environmental organisations that are calling on policymakers to use Jackson Hole as an opportunity to commit to making domestic and global economic policy “steered toward a modern, clean energy economy to meet the demands of climate change”.
Here’s what you need to know about climate activists’ demands on the US Federal Reserve — and what they want to see happen with its current chair, Jerome Powell.
Rewind. What does the Fed have to do with climate change?
Plenty. The Fed, the US’s central bank, is responsible for oversight of the country’s financial system, and therefore has a role to play in pushing the US toward a greener economy — or not.
The Jackson Hole symposium will also be attended by government and finance officials from other nations who have the power to do the same.
What has the Fed said in the past about climate change?
In March, the Fed released a report that analysed financial stability risk arising from climate change. And last year, the Fed joined an international organisation of central banks and regulators to “coordinate on managing the risks that climate change poses to the financial industry”.
These risks include backing banks that invest in mortgages in houses in environmentally vulnerable areas, like those prone to flooding. Another risk is backing loans for oil and gas-based businesses that might fail if they’re unable to switch to renewable energy someday.
Does everyone like the Fed jumping in?
Nope. Like everything in the US’s highly polarised political climate, partisan disagreements on this issue abound.
Twelve Republican senators wrote a letter to Powell accusing the organisation of going “beyond the scope of the Federal Reserve’s mission”.
Powell addressed the backlash in an interview with the Economic Club of Washington, DC in April.
“The reason we’re focused on climate change is that our job is to make sure that financial institutions, banks, particularly the largest ones, understand and are able to manage the significant risks that they take,” Powell said. “We see it only through the lens of that existing mandate.”
What about progressives?
They’re not happy, either.
The US Fed received a grade of D- on a scorecard that was created by Positive Money, an advocacy group promoting a sustainable economy, and that was designed to rank central bank policies’ greenness across Group of 20 countries.
For context, China received the highest score, which was still a mediocre C.
However, the US, alongside most countries, did receive a 10 out of 10 from the group when it comes to “research and advocacy”. This, the organisation says, “shows that actions are failing to match up to words”.
So what do climate activists want to come from the Jackson Hole gathering?
Activists from 64 organisations, including 350.org, wrote to Powell urging several policy shifts.
First, they want fossil fuel investments to be phased out from the Fed, and policy adapted and formalised to incorporate climate risk. The groups are asking the US to take this step prior to the COP26 summit in November, when leaders from around the world will participate in a United Nations global summit on their plans to tackle climate change.
They also want to raise awareness about how central banks contribute to the climate crisis and see them change any policy and regulatory practices that are incompatible with the 2015 Paris Agreement on climate change.
“It’s going to take all of us to make clear that our economy must shift away from fossil fuels immediately in order to keep us below 1.5 degrees Celsius of warming,” Brett Fleishman, head of finance campaigns at 350.org, said in a press release ahead of the Jackson Hole symposium. “The Federal Reserve must account for climate risk and stop the money pipeline before the window of opportunity closes. Incorporating climate risk is prudent, responsible, and necessary investment strategy.”
Climate activists also hope to put pressure on the Biden administration to appoint a “real climate leader” as Fed chairman, replacing Powell. The nomination is expected around the Labor Day holiday, which takes place in early September.
So will Powell be replaced?
Fed watchers seem to think it’s unlikely that Biden will replace Powell, especially as he continues to be a calm presence in a volatile economy still recovering from the shocks caused by the coronavirus pandemic.
While other names have been bandied about, including current Fed Governor Lael Brainard, Wall Street is backing Powell for a second term.
The White House has not commented on whether it is considering a Powell replacement. A progressive alternate would potentially have huge ripple effects not only on Wall Street but across the world.
But climate activists may have an opportunity for progressive influence even if Biden renominates Powell. That’s because Fed Vice Chairman Randal Quarles’s term expires in October.
Fed watchers believe Biden will replace Quarles, and anticipate Brainard, who could prioritise climate change more, might be on that shortlist.
In the meantime, even though the central bank summit is virtual this year, activists hope leaders will pause to note the smoke in the air from the recent West Coast wildfires, Mike Wittig, a member of 350 Silicon Valley, said in a statement, adding “We hope that the evidence of climate change literally before and in their eyes moves the Fed to emergency action needed on climate change.”